February 24, 2019
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Global smartphone growth stalled in Q4, up just 1.2% for the full year: Gartner

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Gartner’s smartphone marketshare data for the just gone holiday quarter highlights the challenge for device makers going into the world’s biggest mobile trade show which kicks off in Barcelona next week: The analyst’s data shows global smartphone sales stalled in Q4 2018, with growth of just 0.1 per cent over 2017’s holiday quarter, and 408.4 million units shipped.

tl;dr: high end handset buyers decided not to bother upgrading their shiny slabs of touch-sensitive glass.

Gartner says Apple recorded its worst quarterly decline (11.8 per cent) since Q1 2016, though the iPhone maker retained its second place position with 15.8 per cent marketshare behind market leader Samsung (17.3 per cent). Last month the company warned investors to expect reduced revenue for its fiscal Q1 — and went on to report iPhone sales down 15 per cent year over year.

The South Korean mobile maker also lost share year over year (declining around 5 per cent), with Gartner noting that high end devices such as the Galaxy S9, S9+ and Note9 struggled to drive growth, even as Chinese rivals ate into its mid-tier share.

Huawei was one of the Android rivals causing a headache for Samsung. It bucked the declining share trend of major vendors to close the gap on Apple from its third placed slot — selling more than 60 million smartphones in the holiday quarter and expanding its share from 10.8 per cent in Q4 2017 to 14.8 per cent.

Gartner has dubbed 2018 “the year of Huawei”, saying it achieved the top growth of the top five global smartphone vendors and grew throughout the year.

This growth was not just in Huawei “strongholds” of China and Europe but also in Asia/Pacific, Latin America and the Middle East, via continued investment in those regions, the analyst noted. While its expanded mid-tier Honor series helped the company exploit growth opportunities in the second half of the year “especially in emerging markets”.

By contrast Apple’s double-digit decline made it the worst performer of the holiday quarter among the top five global smartphone vendors, with Gartner saying iPhone demand weakened in most regions, except North America and mature Asia/Pacific.

It said iPhone sales declined most in Greater China, where it found Apple’s market share dropped to 8.8 percent in Q4 (down from 14.6 percent in the corresponding quarter of 2017). For 2018 as a whole iPhone sales were down 2.7 percent, to just over 209 million units, it added.

“Apple has to deal not only with buyers delaying upgrades as they wait for more innovative smartphones. It also continues to face compelling high-price and midprice smartphone alternatives from Chinese vendors. Both these challenges limit Apple’s unit sales growth prospects,” said Gartner’s Anshul Gupta, senior research director, in a statement.

“Demand for entry-level and midprice smartphones remained strong across markets, but demand for high-end smartphones continued to slow in the fourth quarter of 2018. Slowing incremental innovation at the high end, coupled with price increases, deterred replacement decisions for high-end smartphones,” he added.

Further down the smartphone leaderboard, Chinese OEM, Oppo, grew its global smartphone market share in Q4 to bump Chinese upstart, Xiaomi, and bag fourth place — taking 7.7 per cent vs Xiaomi’s 6.8 per cent for the holiday quarter.

The latter had a generally flat Q4, with just a slight decline in units shipped, according to Gartner’s data — underlining Xiaomi’s motivations for teasing a dual folding smartphone.

Because, well, with eye-catching innovation stalled among the usual suspects (who’re nontheless raising high end handset prices), there’s at least an opportunity for buccaneering underdogs to smash through, grab attention and poach bored consumers.

Or that’s the theory. Consumer interest in ‘foldables’ very much remains to be tested.

In 2018 as a whole, the analyst says global sales of smartphones to end users grew by 1.2 percent year over year, with 1.6 billion units shipped.

The worst declines of the year were in North America, mature Asia/Pacific and Greater China (6.8 percent, 3.4 percent and 3.0 percent, respectively), it added.

“In mature markets, demand for smartphones largely relies on the appeal of flagship smartphones from the top three brands — Samsung, Apple and Huawei — and two of them recorded declines in 2018,” noted Gupta.

Overall, smartphone market leader Samsung took 19.0 percent marketshare in 2018, down from 20.9 per cent in 2017; second placed Apple took 13.4 per cent (down from 14.0 per cent in 2017); third placed Huawei took 13.0 per cent (up from 9.8 per cent the year before); while Xiaomi, in fourth, took a 7.9 per cent share (up from 5.8 per cent); and Oppo came in fifth with 7.6 per cent (up from 7.3 per cent).

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Daily Crunch: Huawei founder remains defiant

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The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. ‘There’s no way the U.S. can crush us,’ Huawei founder claims

In a rare interview with the BBC, Ren Zhengfei defiantly claimed that Huawei’s business is growing stronger amid pressure from the U.S. government, which is pursuing criminal charges over alleged business dealings in Iran.

“The world needs Huawei because we are more advanced,” Ren said through a translator. “Even if they persuade more countries not to use us temporarily, we could just scale things down a little bit.”

2. Flipkart co-founder Sachin Bansal invests $92M in Ola

This represents Bansal’s most prominent and largest investment to date, and his first major deal since he left Flipkart following its sale to Walmart for $16 billion last year.

3. Coinbase buys blockchain intelligence startup to boost security and new asset discovery

Coinbase announced today that it has snapped up blockchain intelligence startup Neutrino in a deal of undisclosed size. Based in Italy, Neutrino has a major focus on services for law enforcement agencies working to track stolen digital assets.

Paul Jacobs, chairman and chief executive officer of Qualcomm Inc., gives his keynote address at the 2012 International Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Tuesday, Jan. 10, 2012. Qualcomm Inc., the largest maker of semiconductors for mobile phones, demonstrated a tablet computer and a Lenovo Group Ltd. television that run its chips, part of an effort to expand into a broader range of products. Photographer: Daniel Acker/Bloomberg via Getty Images

4. Qualcomm launches its next-gen 5G modem and mmWave antenna

5G phones obviously need 5G modems, so maybe it’s no surprise that Qualcomm decided to get ahead of the Mobile World Congress news cycle by launching its next-gen 5G modem and new mmWave antenna today.

5. Twitter names first international markets to get checks on political advertisers

Twitter has announced it’s expanding checks on political advertisers outside the U.S. to also cover Australia, India and all the member states of the European Union.

6. Amazon aims to make half of its shipments carbon neutral by 2030

Perhaps hoping to distract from Greenpeace’s latest report on its “dirty cloud,” Amazon announced a new environmental commitment, focused on reducing its carbon footprint. The company is calling this program “Shipment Zero.”

7. What you need to know about lawyers

One of the first calls every new founder has to make is to a lawyer. But with thousands of attorneys working with startups these days, who should you reach out to? Extra Crunch compiled a list of experts, verified by industry, so you can find the right people to grow your business the way you want.

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‘There’s no way the US can crush us,’ Huawei founder claims

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Huawei’s founder has come out fighting against the U.S. government after he claimed that “there’s no way the US can crush us.”

Ren Zhengfei, who founded the telecom company in 1987, doesn’t often make public statements, but, in a rare interview with the BBC, he defiantly claimed that Huawei’s business is growing stronger amid pressure from the U.S. government, which is pursuing criminal charges over alleged business dealings in Iran. Under those charges, CFO Meng Wanzhou was arrested during a trip to Canada.

“The world needs Huawei because we are more advanced. Even if they persuade more countries not to use us temporarily, we could just scale things down a little bit,” Ren told the BBC via a translator. “Because the U.S. keeps targeting us and finding fault with us, it has forced us to improve our products and services.”

Ren called the arrest of Meng — his daughter, who may be extradited to the U.S. — a “politically-motivated act [that] is not acceptable.”

“There’s no impact on Huawei’s business due to Meng Wanzhou’s loss of freedom, in fact, we are growing even faster,” he said. “They may have thought that if they’ve arrested her, Huawei would fall but we didn’t fall. We are still moving forward.”

In a rare interview, Huawei founder Ren Zhengfei spoke to the BBC about pressure from the US government and the arrest of his daughter, the company’s CEO, in Canada

Legislation bans the government and contractors from using Huawei kit — which includes a range networking equipment and infrastructure tech as well as smartphones — but the U.S. has also sought to convince its international allies to follow suit. Australia, New Zealand and Japan have done so, the latter banned ZTE and Huawei equipment in December, while espionage heads from Australia, Canada, New Zealand and the U.K. — fellow Five Eyes members — were said to have agreed to do so, too, at the end of 2018.

However, just this week, Huawei won a reprieve in the U.K. this week when the Financial Times reported that British intelligence chiefs believe that concerns around spying — the U.S. has accused Huawei of acting as a proxy to Beijing — can be managed. That could leave U.K. operators free to move ahead and work with the Chinese company to build out their 5G networks.

That apparent vote of confidence, which is in stark contrast to the U.S. position, could see Huawei double down on its efforts and presence in the U.K.

“We will continue to invest in the U.K, we still trust in the U.K. and we hope that the U.K. will trust us even more. We will invest even more in the U.K. because, if the U.S. doesn’t trust us, then we will shift our investment from the U.S. to the U.K. on an even bigger scale,” Ren told the BBC.

The U.K’s about-turn is something of a surprise. Pressure from the U.S. saw Vodafone pause purchases from Huawei while a government panel report published last year could “provide only limited assurance that any risks to UK national security from Huawei’s involvement in the UK’s critical networks have been sufficiently mitigated.”

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Sub-brands are the new weapon in China’s smartphone war

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One of China’s top smartphone brands Vivo appears to have joined its fellows Oppo, Huawei and Xiaomi in setting up a new sub-brand as a softening market and heightened competition at home drive players to venture upon their original reach.

A new smartphone brand called iQoo made its debut on Weibo, China’s answer to Twitter, on Tuesday by greeting in English: “Hello, this is iQoo.” It also playfully encouraged people to guess how its name is pronounced, as the spelling doesn’t resonate with either Chinese or English speakers. Vivo immediately reposted iQoo’s message, calling iQoo a “new friend.”

Vivo has not further revealed its ties with iQoo, although the latter’s Weibo account is verified under Vivo’s corporate name. TechCrunch has contacted Vivo and will update the story when we have more information.

Screenshot of iQoo’s first Weibo post

Sub-brands have become a popular tactic for Chinese smartphone makers to lure new demographics without undermining and muddling their existing brand reputation. As the third-ranked player by shipments in 2018 according to research firm Counterpoint, Vivo is the only one in China’s top five smartphone companies without a subsidiary brand.

“Sub-brands can help fill the gap in parent companies,” Counterpoint’s research director James Yan told TechCrunch. “I think iQoo is a brand born for the gaming market, the online sales channel, or young consumers, similar to what Honor did to Huawei.”

Huawei cemented its top spot with solid growth in shipments last year by playing a two-pronged strategy. Its sub-brand Honor has its eyes on the mid-range and Huawei stays at the top end. Vivo’s sibling Oppo, which falls under the same electronics manufacturing outfit BBK, came up with an exclusively online brand Realme in 2018 to go after Xiaomi’s Redmi in India’s burgeoning smartphone market. Xiaomi pressed on by launching Poco for India’s high-tier market. To further solidify its multi-faceted approach, Redmi shed the Xiaomi branding in January to start operating as an independent brand focusing on cost efficiency.

These moves arrived as years of breakneck growth in China’s smartphone space comes to an end. Overall smartphone sales contracted 11 percent in 2018 according to Counterpoint, as users become more pragmatic and less likely to upgrade their handsets. Local players reacted swiftly by going global and introducing headline-grabbing features like Xiaomi’s folding screen and Honor’s pole-punch display, putting a squeeze on global players Apple and Samsung. In 2018, Huawei shored up a 25 percent market share to take the crown. Trailing behind was Oppo, Vivo, Xiaomi and Apple . Samsung plunged 67 percnet to take seventh place.

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H1-B changes will simplify application process

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The federal government yesterday published the final rule for changes to the H1-B visa program, which is one of the primary conduits for technical talent to come and work in the United States.

There are two key changes coming with the rule. First, the government will require applicants for an H1-B visa to electronically register with the immigration office for the H1-B lottery before they submit their applications or documentation.

Due to hard caps imposed by Congress on the number of workers who can be admitted under the program, tens of thousands of people apply for a visa who ultimately do not attain it. Under the current process, applicants must submit their entire applications including supporting documentation in order to apply for a lottery run by USCIS, the immigration authority.

Last year, roughly 190,000 applicants applied for 85,000 total slots. That means 105,000 people put together complete applications but lost out on the lottery.

Under the new rule that will be in force for this year’s H1-B process, applicants will first register with USCIS electronically, which will process the lottery. If selected in the lottery, an applicant would then be invited to submit their application and supporting materials. The idea is that you only have to do all the work of applying when there is an actual slot available.

The change is likely to cut into the revenue of immigration attorneys, who today prepare full applications for all applicants. A typical H1-B visa application retainer for an attorney today in Silicon Valley runs in the low thousands of dollars each, with companies picking up the tab. I am sure attorneys will still recommend doing some prep work, but the new rules should cut costs for employers.

The second change of the final rule has to do with how the lottery is conducted. Be very careful here, as the changes are somewhat subtle and there is a lot of malarkey being written across the internet about it.

Under the H1-B program, there are two pools of applicants: let’s call them the regular pool and the advanced degree holders pool. There is a cap of 65,000 for the regular pool, and 20,000 for the advanced degree pool, which is limited to applicants holding a master’s degree or better.

In today’s process, advanced degree applicants first go through the lottery of the advanced degree pool, and if they fail, they get added to the regular pool for the second lottery. In the new process just confirmed by USCIS, that process is inverted: the regular pool lottery will be run first with all applicants, and then the advanced degree pool will happen second with advanced degree applicants who failed in the first lottery.

What does that mean for applicants? Well, we have to do a bit of table napkin probability math to understand* (feel free to skip ahead if you just want the answer).

Using last year’s numbers there were 95,885 advanced degree applicants for 20,000 spots, so a roughly 20.85% chance of receiving a visa. That means 75,885 advanced degree applicants who lost out were then added to the regular pool of 94,213 applicants. That’s 170,098 applicants for 65,000 visas, or roughly a 38.21% chance of getting a visa. Across the two lotteries then, advanced degree holders statistically would have gotten 20,000 visas from the first lottery, and then 38.21% of 75,885 or 28,998 visas from the regular pool lottery. So an advanced degree holder had a 51.1% of getting an H1-B visa, compared to 38.21% for regular pool applicants.

That’s the old probabilities, so let’s see how reversing the sequence of lotteries change the probabilities. Now, 95,885 advanced degree holders join 94,213 regular applicants for 65,000 spots, for a success rate of 34.19%. That means 32,786 advanced degree holders will be successful in the regular pool. From there, the 63,099 advanced degree applicants who were not successful would get to go through the advanced degree lottery of 20,000 spots, a probability rate of 31.70%. Combined then, you have 20,000 + 32,786 = 52,786 successful advanced degree holders out of 95,885, for a combined statistical success rate of 55.05%.

Net-net, the changes in the lottery sequence mean that advanced degree holders would have been successful 55.05% of the time last year, compared with 51.1% under the previous system. For regular applicants, the success rate declines from 38.21% to 31.70%.

So to be accurate in language, I would say that USCIS is (from a statistical point of view) “placing an additional emphasis” on advanced degree holders. It’s a meaningful adjustment if you are applying of course, but ultimately nothing has changed since immigration priorities are written into the law and the executive branch doesn’t have much flexibility to change these systems.

(*One side note: that probability math is “rough” because the H1-B program has a variety of small preferences and set asides that make the probability math unique for each person. Citizens of Chile and Singapore get special treatment, and if you apply to work in Guam and a few other territories, you also have your own special process).

Talking about borders: Huawei and smartphone privacy

(Photo by Jaap Arriens/NurPhoto via Getty Images)

The U.S., like many countries around the world, doesn’t provide a lot of privacy rights at the border. The country can scan the electronic devices of any traveler, and save files and other data in those sweeps, and such tactics are increasingly common much to the chagrin of privacy advocates like the ACLU.

But there is a benefit of these sweeps when it comes to closing in on an international investigation. The U.S. Department of Justice charged Huawei’s CFO Meng Wanzhou with a variety of crimes including bank fraud and wire fraud this week in connection with Huawei’s alleged breach of U.S. sanctions on Iran.

From the indictment, some of the key evidence for the case comes from a sweep of Meng’s smartphone while she passed through JFK Airport, where border officials captured Huawei’s talking points about the Iran / Skycom situation. From the indictment, “When she entered the United States, MENG was carrying an electronic device that contained a file in unallocated space—indicating that the file may have been deleted […]”

As with debates over end-to-end encryption, there are complexities to the level of privacy that should be offered at national borders. While the general right to privacy should be protected, law enforcement should also have the tools it needs to stop crimes within a proper due process system.

Talking about borders: Brexit and manufacturing scale

(Photo by Dan Kitwood/Getty Images)

I talked about manufacturing scale yesterday in the context of Foxconn’s multiple shutdowns of its factories in Wisconsin and Guangzhou this week. Apple isn’t the only one failing to find a screw these days — now the entirety of Britain’s industrial base is worried about finding components.

Bloomberg noted that British “Companies’ inventory holdings grew in January at the quickest rate in the 27-year history of IHS Markit’s survey, the group said in a report Friday.” Companies are stockpiling everything from screws and parts to medications as the risk of a no-deal Brexit increases after Parliament has repeatedly struck down plans for Britain’s withdrawal from the European Union.

Stockpile as much as you want, but China’s success over the past three decades since reform and opening up has been making its borders, customs, and ports some of the most efficient in the world. If Britain wants to compete, it needs to do the same.

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Share your feedback on your startup’s attorney

My colleague Eric Eldon and I are reaching out to startup founders and execs about their experiences with their attorneys. Our goal is to identify the leading lights of the industry and help spark discussions around best practices. If you have an attorney you thought did a fantastic job for your startup, let us know using this short Google Forms survey and also spread the word. We will share the results and more in the coming weeks.

What’s Next

  • More work on societal resilience
  • I’m reading a Korean novel called The Human Jungle by Cho Chongnae that places a multi-national cast of characters in China’s economy. It’s been a great read a quarter of the way in.

This newsletter is written with the assistance of Arman Tabatabai from New York

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